WEEKLY TRENDSETTER (Sept 2nd,2022)
| 2022 | Aug 19 | Aug 26 | Ch % |
| NIFTY | 17758 | 17559 | -1.12 |
| BANK NIFTY | 38986 | 38987 | 0.00 |
| USD/INR | 79.80 | 79.83 | 0.04 |
MARKET REVIEW–The week was high on volatility and the pattern was similar to the previous week as the Nifty and Bank Nifty witnessed selling pressure around 18000 and 39000 respectively and going into next week could see the market breaking critical support levels to begin on the back of weak global cues.
BACK TO RESULTS (June qtr.)
The June quarter results are getting announced. The small and mid-cap segments are the ones where some turnaround results could be looked at. This week let’s explore some of them:
Rs in cr, Bracket indicates actual losses in June,21 quarter.
| Company | Revenue | Net profit |
| M&M Financial | 2902(+13.8) | 228.2(-1590) |
| IDFC First Bank | 4921(+20.4) | 485(-621) |
| Kalyan Jeweller | 3332(+104) | 107.8(-51.3) |
| Bata India | 943(+253) | 119.4(-69.5) |
M&M Financial (206)-The company has a very deep network pan India and is in the business of financing purchase of pre-owned vehicles, tractors, passenger cars, commercial vehicles, construction equipment and SME financing. Accordingly, to the management, asset quality metrics are expected to improve going ahead on the back of sharper focus on collections and expected improvement in macro-economic activity. The 2nd half of FY22-23 could see resurgence post the monsoon season and onset of festive season. The hardening of interest rates could be critical after 2 back-to-back rate hikes. However, post Covid resurgence should ensure that the hikes are passed on to customers. The scrip has run up on expected better times and at current levels looks well priced.
IDFC First Bank (48.50)-The scrip has been high on expectations in the last 2-3 years. The June quarter results has shown improvement in operational matrix and provisions steadily going down over the past few quarters. The management commentary is interesting as past legacies of a bad corporate loan or infrastructure loan are settled. The CASA which was at 10% 3 years back now stands at 50%. With interest rates hardening the bank could look to consolidate on the same as increasing interest rates will become more attractive for the retail. The company s business model is also tilted towards retail lending where NIMs are higher and the coming quarters could see the bank further making inroads into this space. The scrip has been languishing around 40-50 for the past 2-3 years and could well be in for better times. Accumulation at declines could be considered.
Kalyan Jewellers (79)-The company is gradually gaining attention with improved performance which comes on the back of increasing footfalls in India as well as Middle East. It now has 158 showrooms and, in the June, quarter started its first franchised showroom which could accelerate semi-urban and rural penetration. It has made a mark with strong advertisements in the past 3-4 years and the coming festive season should see the growth accelerating with the e-commerce division, Candere also posting profits for the quarter. One interesting aspect of the company s performance is the fact that in the last one year while the revenue has doubled interest costs have been declining with improving operating matrix. With an EPS of Re 1 for the quarter, the company could be on the cusp of aggressive growth on the back of huge demand potential from the retail population which now has one more credible brand. The scrip has surged on huge volumes and a market correction could be the ideal opportunity for accumulating the scrip.
Bata India (1870)-The company seems to be back on track post the Covid slowdown with a resounding quarter. The company is betting on franchisee model to penetrate into rural and semi urban areas and the digital platform is also expected to accelerate offtake. The company is also resorting to cost cutting measures which will be critical in the long run as EBIDTA margins are at high levels of 20-25% which might be difficult to sustain. The scrip is trading at rich valuations and with an expected EPS of around 30-35 for FY22-23, it looks well priced though any sharp correction could see discerning investors entering.
MARKET OUTLOOK
Some technical cues are as follows going by market trends: –
NIFTY-The index did see short covering around 17400-500 levels but failed to cross 18000 and towards close of week looked under pressure which could aggravate in the early part of next week on the back of a sharp sell off in US markets. Levels of 17200-300 could be revisited.
BANK NIFTY-The imminent correction did happen in the early part of the week which however was bought into and the index once again made an attempt to consolidate above 39000 though it failed to sustain. For the coming week the previous week’s low of 37950 could be re-visited and odds are high that the correction could deepen to levels of 37200 in the coming weeks. For the short term 38700-39000 remains a strong resistance.
SCRIPS TO WATCH OUT
IDFC First Bank (48.50)-The stock has been in a range of 30-50 in the last few years and higher levels have got sold into. However, the last couple of weeks has seen strong volumes as the stock now should consolidate above the 200-dma of 42 which should act as a strong support. Some cooling off to levels of 45-46 could be used to accumulate as levels of 55-60 could be seen in the coming weeks. Long term investors could also look into buying into the scrip gradually.
Kalyan Jewellers (79)-The scrip has surged on strong volumes in the past few weeks to a 52-week high of 83 which could see some cooling off to levels of 70-75 in the coming weeks. Gradual accumulation could be considered and the scrip now promises to be a sound long term bet and levels of 100 could be touched in the coming months.
Wishing all readers Happy Ganesh Chaturti !
Have a great trading week!
Note: Any queries /clarifications may be addressed to stockmasala@gmail.com .
Krish Subramanyam